Posted
by
michael
on Sunday February 23, 2003 @03:58AM
from the peer-pressure dept.

Anonymous Sniper writes "The Australian Competition and Consumer Commission today announced that it will hold a public inquiry into whether an Internet interconnection [peering] service should be regulated. This would mean the big National ISPs would have to pay smaller ISPs for traffic originating within their networks, which means everyone's routing tables would become more efficient, and cheaper for the smaller ISPs. This would also set a significant international precedent. Horray for the ACCC and Allan Fels - the same people who made Region-Free DVD players legal here."

This is just what we need! Now, instead of being threatened with de-peering for exceeding their traffic quotas, which is usually due to SPAM, we'll get more spam since the smaller ISP's will now get paid to generate all that traffic.

I know i didnt get this, so i think this is the important info:"There are some apparent curiosities with current interconnection arrangements. If I am connected to a smaller ISP and I send an email to my friend at one of the four larger ISPs, the larger ISP will generally charge my smaller ISP for sending the email. However, when my friend at the larger ISP sends me a return email, my smaller ISP will have to pay the larger ISP once again".ya, that dosnt sound real fair

IT all depends on who needs who.Major backbones in the US can say "We don't need you, little ISP, you need us, because you need us to carry your traffic, or your service will suck.".

If all the litte isps got together, things would be different.. as the big isp has no value if all it's customers leave.

It is a dynamic thing, to be sure.

If we are going to say "Internet is important" and regulate, then the actual level of service should be regulated, not the peering (in other words, don't go half way). Force ISPs to provide real, unflitered IP routing, and not block traffic in any way (or at least, have an easy way for a subscriber to turn blocking off.) Force them all to provide ipv6 space as well. Let's get rid of nat.

Internet interconnection allows customers connected to one Internet network to send and receive emails and access web sites which are connected to another Internet network. Generally it is the case that consumers connect to the Internet via an Internet service provider or ISP.

Anything that goes to help out the smaller guys is a good thing. After all, the big guys gobble the little ones up, and then give crappy service for an ever increasing price.

Perhaps this will let these beloved little IPSs survive just a little bit longer.

Anything to keep the internet how it should be is a good idea, and it is nice to see the Aussie gov't protecting capitolism by leveling the playing field. After all, more compeition = better experience for every consumer.

Anything that goes to help out the smaller guys is a good thing. After all, the big guys gobble the little ones up, and then give crappy service for an ever increasing price.

Perhaps this will let these beloved little IPSs survive just a little bit longer.

Anything to keep the internet how it should be is a good idea, and it is nice to see the Aussie gov't protecting capitolism by leveling the playing field. After all, more compeition = better experience for every consumer.

Not only a better experience, but also better prices. Usually if there are only a few competitors in a market, the prices for that good/service will be very similar. A good example of this is gas. No matter who you get your internet service from its the same internet. Anybody that wants to should have a chance to compete in that market.

I agree. And another thing: an internet with more number of smaller players is more stable than one with fewer, larger players. Remember the speculations when worldcom went down? Ideally there shouldn't be any such thing as backbones. While we can't say that of today's internet, its certainly better now than in the past.

Anything that leads to a more distributed internet is a Good Thing, IMHO. Lack of centralization is the biggest reason why the net has been successful, but recent trends are disturbing (eg: ICANN). OTOH, the US-centeredness of the internet has decreased greatly since the early days, which is good. Another thing: with the growth of permanent connections worldwide as against dialup, more and more of the average Joes will host their webpages on their own machine (like me:) [cjb.net]), as against uploading it to some free server, which would typically be in the US. So maybe things are going to get better.

Australia is notoriously regulation happy (yesterday sent off $100 fine for NOT voting in the election - that's how regulated we are.)

However we have a champion of the poor dispossessed geek in Allan Fels. The ACCC is the counterbalance to the Australian authoritarianism and big business, and actually works quite well, as it has teeth and a fearless leader.

"Australia is notoriously regulation happy (yesterday sent off $100 fine for NOT voting in the election - that's how regulated we are.)"

What I'm about to ask is really off-topic, but I don't get much opporunity to learn about how other countries work. Registerred voters were fined for not voting? Are they allowed to vote 'none of the above'?

Just curious. There's a subtle difference between not voting and voting for niether.

No. To have responsive and responsible politicians, you have to create competition. In the current duopoly+irrelevants, the situation is barely better than in the US. It's just when the Labral Party gets elected, they can say that seeing as a majority of 85%95% people voted for them, they have a Mandate to introduce things they promised never to introduce. Also, our system is essentially geared up to give a party (or coalition) an essential dictatorship for a term; this is why we're going to war with an actual dictatorship. Sounds intelligent, ja?

It does mean that politicians are less able to skew their policies towards those more likely to vote, which is a good thing IMHO.

As to pork barrelling, that still occurs, but pork is aimed differently to that in the US. Our arliamentary system, particularly when you throw in proportional representation in the Senate and IRV in the lower house, are quite different to the US's presidential system, and trying to explain the different dynamics to people who've never had exposure to it is kind of complex.

What I'm about to ask is really off-topic, but I don't get much opporunity to learn about how other countries work. Registerred voters were fined for not voting? Are they allowed to vote 'none of the above'?

The original poster is over-exaggerating. He didn't get fined for not voting, he got fined for not attending a voting booth on election day.

It's mandatory to register to vote in Australia. And, once registered, it's mandatory to get your name ticked-off on the electoral roll each time there's a State or Federal election. But once your name is ticked off you can leave if you don't want to vote.

I appreciate the "necessity" of a counter-balancing mechanism such as the ACCC in a rigged system, but in the end it only serves the ultimate interests of the monopolists, oligarchists, and statists, however well-intentioned, because it in fact validates the rigging, and depends on it itself. It becomes part of the problem.

They would do more real good if they were plotting actual insurrection or something.

Very commom misconception this one. The law requires you to vote. Informal votes count by virtue of guaranteed confidentiality. What is not covered is the fuck-off-to-somewhere-else attitude of turning up and having some poor base-wage clerk mark your name off. YOU ARE WRONG.

HAVE YOUR SAY OR FUCK OFF TO SOMEWHERE THAT DOESN'T CARE WHAT YOU THINK.

If you don't care enough to vote then don't expect the rest of us to give a fuck.

I can, if I choose, place all voting slips in the bin provided on the way out. I don't have to fill them out. I don't have to put them in the boxes provided. There is no electoral offence that I can be charged with if I choose to do this. It is counted as a vote.

And yes, I have done this. I even smiled at the scrutineers and electoral officials as I did so. They can't do anything about it and they know it. I don't hide behind an informal donkey vote (forms submitted but not valid) by virtue of guaranteed confidentiality. I do it in an obvious manner, in plain view of multiple witnesses. And they can't touch me.

Please, take your attitude and **** off. If I am ever in the position again where I look at the candidates and find myself choosing the lesser of two evils, I will do the same again. No political party shall ever be given a 'mandate' by me because they were simply the best of the worst.

Unfortunately, Allan Fels announced a while ago that he will not be seeking another term at the end of this year (it is a rather demanding job). The Liberal (i.e., pro-corporate Reaganite/Thatcherite, "what's good for big business is good for Australia") government announced its candidate for his replacement, a former leader of a business organisation. It remains to be seen just how much the new tory ACCC will champion the little guy, or whether it will adopt a more "laissez-faire" approach.

What's the big deal? Most people pee into a toilet or urinal when they have to go. What they ought to be investigating is why so many people don't wash their hands afterward. Now that's something worth looking into.

So why should governments regulate this? What kind of abuse is going on?

If only one or two companies own the pipes out of the contry they can behave baddly. As the article says, this all stems from a "broadband enquirey". It was highly critical of bigger players protecting their older investments by slowing rollout of broadband technologies.
This is a positive development because decentralised infrastructure will, amongst other things prevent larger organisations from monopolising bandwidth.

Last year you could buy a 155mb link from Calif to Sydney for about AU$60,000/mo (US$25k). Since there are now several other compaines that have upgraded their lines, the costs have gone down.

However years ago, Telstra (the phone compnay) set the rate for 64k ISND link to be about AU$.20/megabyte. When they did that, the rate to get a US carrier to call Australia and ship a 64k stream over was about the same. Also for that 64 K channel, you get to pay about au$300/mo if you transfer 0 bytes. The result of their high prices is that no one else would need cut their prices so the "discount" services are now charging amounts about the same. Now that Telstra has cut prices, the discount services are typically more expensive than going with the monoploy.

Today the prices are dropping. The Kiwis (who share the link to the US) now can get 2 mb shared unlimited services for a only about NZ$500/mo (us$200ish).

The Government used to own the ONLY Australian Telecom company (at the time), now called "Telstra". They own all infrastructure, there is no competition in the backbone network. Telstra owns it all, and abuses its position.

Thankyou Ziggy Switowski - for those not in the know, Ziggy is the CEO of the dominant player in the Australian Telco market(Telstra) and has been slapped down many times by the ACCC for predatory business practices, as well as screwing his customers to the wall.

Australia really needs some not-for-profit (government sponsored?) peering points (IX's) like they do here in the UK (Linx [linx.net], Lipex [lipex.net]). Having large ISP's in control of the peering game will inevitably make the rules unfair.

This actually exists (not-for-profit & non-government) and is called AusBONE [ausbone.net], they are getting close to critical mass in terms of the number and size of members (ISPs), to take on the big boys in town, not to say that they can't use some help.

And there are many regional IXes, besides things like the AUSBONE. WAIX [waia.asn.au], the Western Australian IX, is a good example of this done fairly well. Almost every ISP with a presence in the state has a presence, as well as several other big transport providers (Singtel, Comindico, etc).

There are a few main problems with Australian peering. First, certain big [bigpond.com], nasty [telstra.com] corporations profit too much from providing rip-off transit services by refusing to peer with IXs. Secondly, said companies have really stupidly designed broadband solutions involving tunneling most traffic interstate -before- providing endpoint connectivity. Thus local peering is impossible thanks to stupid design. Minus one for incentive.

The second issue is one that this will hopefully help address - BGP size. Unfortunatly, Australian BGP feeds are notoriously poluted thanks to various hacks and tricks in our national transit networks. This causes everyone a headache, as keeping a full BGP feed on a router (for both routing -and- accounting puposes) is expensive. Route tables are pretty memory hungry, and most backbone infrastructure is still driven by Cisco routers. Extra ram is not cheap, assuming you have the grunt to hold the table anyway.

The third problem is consumer oriented. Australian ISPs -have- to make money currently because Transit is expensive here. Even with this change, transit will still be far more expensive than in most other places in the world. While solutions to this are being worked on (new links and companies [comindico.com.au] trying to bypass the traditional monopolies [telstra.com]), this means Australian consumers are almost always traffic capped and either shaped or billed after a 3-6gb allowance.

It's not 1gb [ntl.co.uk], but it's still a pain. Now, the problem is that in Western Australia we are lucky. Most ISPs give free access to the WAIX for their customers. This is fast and a major cost cutter for everybody. The IX has a lot of excellent resources - mirrors abound for everything.

However this does not happen in most other states. Or to a limited extent. Part of this is the age-old ingress/egress problem (just because a traceroute going OUT, eg a http -request- goes via a IX, the charged incoming data usually won't) presenting both confusion and billing problems. This leads to the second part, where most IXs, eg AusBone, do -not have a well maintained list of freely peered resources available-.

Billing is a pain for ISPs in other states as it's very hard to tell if something is freely available, and providing this as a marketing ploy (technically IXes are good... netadmins will be happy, finance may be happy - but given the outlay for ram for BGP, etc, -somebody- has to convince marketing it's a good idea:) is difficult at best. The WAIX has several fairly well maintained lists of resources, many which local ISPs list on their websites. This provides user incentive.

AND A MAJOR GROWTH POINT. Users, if provided with a list of resources available at a freely exchanging peering point, are more likely to try and convince their providers to participate. It's simply.

... and that is pretty much Australian Internet Exchanges 101... from my uneducated point of view of course:)

Actually there are a few not-for-profit peering points in Australia. I am the Technical Manager of WAIX (West Australian Internet eXchange) and we are the largest public IX in Australia (by number of participants AND amount of data exchanged) and we are non-profit. WAIX (www.waia.asn.au/waix) is run by the WA Internet Association (www.waia.asn.au), a non profit association for the Internet community in WA. The South Australian Internet Association runs SAIX (www.saia.asn.au), a smaller not for profit exchange in Adelaide, SA. Ausbone (www.ausbone.net) is also non-profit and has points in Brisbane, Melbourne and Sydney.
There is now also a new company running peering points in a few states, Pipe Networks (www.pipenetworks.com) are present in Brisbane, Adelaide and Sydney iirc - however they are not run on a non-profit basis but are proving to be fairly popular.
Over here at WAIX we have *every* ISP in WA peered either directly or via another participant with the exception of Telstra, Primus and Worldcom. Our large peers include the likes of iiNet/Eftel/Westnet who are by far the largest three ISPs in WA, the entire WA Government, all WA Universities, Singapore Telecom (and Optus via Singtel), Comindico, Connect.com.au, Pacific Internet, Netspace and Swiftel. (Complete list at http://mrtg.waia.asn.au/mrtg)
So I guess in short, no we do not need more exchanges - we can work with what we have now, but we do need pressure applied to the large national backbones to force them into peering - how they could possibly justify not peering with WAIX with its massive number of peers I don't see.
As a side not we (WAIX) are attending an industry forum on Internet Interconnection this week in Sydney to discuss peering matters with the various telcos and large ISPs, all substantially large ISPs in.au have been invited, as have the major exchanges. Interesting enough this meeting was instigated by Telstra via ACIF (The Australian Communications Industry Forum) prior to this announcement from the ACCC, so I think its fair to assume Telstra is aware that they are going to have to take a bit of a more serious look at peering - or at least look as if they are interested!
Also worth a mention is that we do not expect the major backbones to peer their entire network, strictly speaking we require people to peer what is financially viable for them - for some peers (Comindico & Singtel for example) actually do make their entire networks visible to the exchange, but we would be more than happy with a WA-only Telstra peer with WAIX, and I'm sure SAIX would be happy with a SA-Only telstra connection.
Gavin

There are some apparent curiosities with current interconnection arrangements. If I am connected to a smaller ISP and I send an email to my friend at one of the four larger ISPs, the larger ISP will generally charge my smaller ISP for sending the email. However, when my friend at the larger ISP sends me a return email, my smaller ISP will have to pay the larger ISP once again.

Umm... this was the way BGP (Border Gateway Protocol: the protocol that basically routes the entire Internet, more info here [mit.edu]) was designed to work. It's what gives ISPs incentive to cooperate yet still compete with one another. I don't see how the Australian government can do anything to change this since under BGP, there is no incentive to charge depending on which way information is flowing.

BGP already provides some of these benefits for smaller ISPs by allowing peering relationships. Let's say there is a parent ISP A, with smaller ISPs B and C in a transit relationship to A (in other words, they pay A). If B wants to send to C, it normally has to go through A, and both B and C end up paying for it. If there is significant traffic between B and C, they may decide to set up a peering relationship, sending packets directly between one another and bypassing A. Many peering relationships are set up such that B and C don't pay each other anything, since they both end up saving money by bypassing A.

Also, if you think about it, if A charges B for anything going from B to A and B charges A for anything going from A to B, you end up cancelling much of the money they make from one another. Granted, the larger ISP will most likely come out ahead, but it still needs to pay its bills. So it raise prices anyway in order to recoup the money that was cancelled out. In effect, the amount that the larger ISP charges will be unchanged, but there is extra work involved in keeping track of all this information. To make an analogy, does it make sense for you to charge your ISP for packets that go one way and not the other? No, you're paying them for the connection that they provide.

Finally, how do we determine in what situations do charges apply? If an e-mail goes from A to B, it seems logical that A should pay. But if B makes a request for a web page and the web page is transferred from A to B, should A still pay? If we make different payment rules for different protocols, this will become a mess.

In summary, I don't see how this regulation will effect anything except to make everyones lives harder.

BGP already provides some of these benefits for smaller ISPs by allowing peering relationships. Let's say there is a parent ISP A, with smaller ISPs B and C in a transit relationship to A (in other words, they pay A). If B wants to send to C, it normally has to go through A, and both B and C end up paying for it. If there is significant traffic between B and C, they may decide to set up a peering relationship, sending packets directly between one another and bypassing A. Many peering relationships are set up such that B and C don't pay each other anything, since they both end up saving money by bypassing A.

The situation in Australia is that A is "Telstra", and B and C are "everyone else".

Telstra also owns 100% of the installed base of copper lines in Australia, and about 90% of the installed base of fibre optic capacity, so if B and C decide that they want to talk to each other directly they almost always have to lease carrier services from Telstra... which has set the tarrifs so that the cost of directly linking is very similar to the cost of sending transit through Telstra in the first place.

The monopoly sitation with respect to installed telecommunications infrastructure distorts the way the peering arrangements you have described occur. The Australian situation is similar to what you would have had in the US if AT&T were never broken up.

For long-haul and metropolitan peering, US ISPs can obtain competitive bids from any of a number of CLECs and national carriers, or they can dig-up the sidewalks and install their own fibre. In Australia, digging up the sidewalk for laying cable is illegal without a Government-sanctioned carrier license, and there is very little in the way of competitive telecommunications infrastructure, so Telstra effectively becomes the sole provider.

The situation is slowly changing, but it's a very fragile ecosystem at the moment. Almost all of the Telstra competitors are either in the infancy or in bankruptcy... so if you were a major ISP, would you think that peering was an economically viable long-term option?

Finally, Telstra themselves never peer with anyone -- As far as they're concerned, every single other ISP in Australia, including the likes of Worldcom, falls into the "customer" category. Oh, hang on, there is one exception: about five years ago, the ACCC forced Telstra into peering arrangements with OzEmail and Optus (the number-2 and number-3 ISPs at the time). The terms of those arrangements remain a commercial secret, and no further peering arrangements have ever been entered by Telstra.

The situation in Australia is that A is "Telstra", and B and C are "everyone else".

The monopoly sitation with respect to installed telecommunications infrastructure distorts the way the peering arrangements you have described occur. The Australian situation is similar to what you would have had in the US if AT&T were never broken up.

The Australian situation is no different from the situation in most countries where you had an old telecom monopoly - like in most of Europe. I'm wondering whether Open Spectrum and small ISPs deploying wireless technology both for last-mile and backbone links would accelerate the dismantling of the old monopolies.

The Australian situation is no different from the situation in most countries where you had an old telecom monopoly - like in most of Europe.

Yup -- And Europe is the canonical example of a place where regulation is used to curb the excesses of the free market. I mean, you don't seriously think that the likes of Sprint and WorldCom compete with European telcos on an equal footing, do you? Of course not - the local regulators restrict the activities of the incumbent telcos to give the new entrants (mainly US companies) assistance.

(There is regulation like that in Australia: For example, Telstra is not permitted to give geographically-specific discounts off its published price schedule. So they can't react to a small carrier which is only operating in Sydney by lowering their Sydney prices, unless they also lower their prices everywhere else in Australia. Other carriers don't have that restriction. In market spaces where there is no competition, most of the restrictions on Telstra are pretty useless -- which gets us back to the peering situation, and the suppression of same by high monopoly rents)

As for last mile technologies -- You're missing the point completely. Peering between ISPs has very little to do with last-mile links, unless the ISPs are within a few miles of each other. In many countries you also have the Government regulating the rollout of wireless gear, because the regulatory treatment which a wireless link receives is exactly the same as the regulatory treatment a wired link receives -- And if you can't dig-up the road to install fibre without a Government license, then you damn-well can't stick up a pair of antennae to achieve the same result wirelessly either. It's not the fibre which matters to the lawmakers, it's the fact that you've built a link which the Govt doesn't know about and can't wiretap.

As for last mile technologies -- You're missing the point completely. Peering between ISPs has very little to do with last-mile links, unless the ISPs are within a few miles of each other.

I was thinking about the general difference between the old telcos and new entrants in the ISP market. The old telcos also own most of the last-mile copper in the ground, so wireless is an alternative for circumventing that.

In many countries you also have the Government regulating the rollout of wireless gear, because the regulatory treatment which a wireless link receives is exactly the same as the regulatory treatment a wired link receives -- And if you can't dig-up the road to install fibre without a Government license, then you damn-well can't stick up a pair of antennae to achieve the same result wirelessly either.

Can you give me examples of this? In the US, you have the FCC regulating frequency allocation, allowed emitted power. You have similar structures in EU, Japan, etc. As long as you use the bands reserved for unlicensed use (mainly 2.4GHz - i.e. 802.11/b/g), there are no restrictions on setting up a wireless link as long as you stay within allowed emitted power. Also, getting a license for using, say, 3.5GHz equipment for backbone links isn't impossible where I live.

It's not the fibre which matters to the lawmakers, it's the fact that you've built a link which the Govt doesn't know about and can't wiretap.

I'd love to get some background material on this. I happen to run a wireless ISP in an EU country, and I have yet to see the black helicopters arrive because the covernment can't tap my links.

Also, if you think about it, if A charges B for anything going from B to A and B charges A for anything going from A to B, you end up cancelling much of the money they make from one another. Granted, the larger ISP will most likely come out ahead, but it still needs to pay its bills.

I wish you could count! Request and ACK packets are small, so all traffic from B to A would earn A small fees. Yet reply traffic (images, iso, mp3s) is huge, so A pays B? Are you nuts?!?

... isn't as bad as one might expect from the article. Quite a number of small and medium-sized ISPs peer, as do larger ISPs. The problem is that larger ISPs (ie Telstra, Optus, Connect.com etc) will only peer among themselves, and not with anyone further down the foodchain. Peering groups such as Pipe networks [pipenetworks.com] and ausbone [ausbone.net] have had good results getting the smaller ISPs to peer with eachother, and varying results with medium-sized ISPs, but the carte^H^H^H^H^Hclique of large-sized ISPs (ie have non-trivial amounts of International bandwidth, and large amounts of content on their network) just wont play ball, and the ACCC will have a fight on their hands if they want to make them.

Complicating things is the fact that probably the biggest content host in Australia (no names, no pack drill) steadfastly refuses to peer. Of course, they're owned by $tier_1_ISP. If they peer, they give away the traffic. If they don't peer, they charge money for the traffic. What do you think they're going to do?

Kids, when I got on the internet here in Denmark, there was no world wide web. You paid for an expensive account on a unix box you could dial into. You could then access Gopher, Veronica, etc. Not that it made it less interesting, because the noise-floor on the "sigal" was very low

Anyway, there were only one place to get connected in the beginning, then came providers and the problem that our local(inside the country) traffic, got routed half across Europe only to end up on the other side of the street.
Then in 1994 came the DIX [www.dix.dk], Danish Internet eXchange point. Horray. So all a provider has to do, is to get a connection to the DIX and they can make peering agreements with other providers to route to each other networks via the DIX.
Now if you visit their site, you can see the prices clearly stated on the page(divide by 7 to get $(damn is going down)).

I(of course) can't see how the entire network in Australia is built, but I'd say a Exchange point would be good. I can't imagine forcing someone to pay for traffic the way the article mentions here, can be good.
But if you set up a exchange point in a major city where everybody is represented, and the cost to get connected to it, is the cable and a small fee to keep it running. Even smaller ISP's can join. But then again I can't get the complete picture by just reading one article.

The first problem is that Australia is much much bigger then Denmark. The second (and bigger) problem is that for two smaller ISPs to peer they usually must buy a link from the monopoly Telstra at a cost where basically the two smaller companies would pay for every bit twice.

We are starting to see some exchange points similar to DIX in Canada. Finally. We used to have similar problems to you where traffic going to your next door neighbour could travel a thousand kms, across timezones, and through the US.

Can someone show me a single example of the government regulating a service and the cost going DOWN. I know quite a few that the government has STOPPED regulating and the cost has gone down (see airlines, power - except for california's Dumbassed approach, banking, phones) contrast that with my cable service that seems to have a rate increase 3-4 times a year, or local phone service

Can someone show me a single example of the government regulating a service and the cost going DOWN

Basically you're right about what regulation of a product or service does, but be careful - this isn't about regulating the service, it's about regulating the anti-competitive behavior of a cartel. If you look at the countries where internet access is most expensive, they have either a monopoly ISP or a cartel which prevents small companies from entering the market.

Just ask anyone with a deregulated, privatised electricity supply. Adelaide Australia (electricity up by more than 30% for Christmas), and California.

And I don't think deregulating our airlines (Australia) helped either. They're either about to drop out the sky like they do in the USA or we're only going to have Qantas and only football teams are going to be able to afford to fly, because the airline sponsors the competition. The internet tickets may be cheaper but the I have to fly now/tomorrow tickets, which used to be the cheapest are now more expensive than ever before.

And banking, how that has gone to shit in Australia. The banks are making huge profits, laying off lots of staff and slugging the hell out of their customers with less than multimillion turnovers. The only way to get your money out of them is to become a director or exec and then quit. Sigh. Even the shareholders are getting a raw deal out of this highway robbery. Bring back regulation, I say!

My understanding with Australian internet traffic is that there are already different rates/costs and limits for upload traffic than for download traffic, especially if you have a "permanent" connection. (anyone else get dropouts on their adsl?)

Also when I was in NZ they had a different rate for traffic downloaded from outside the country ie USA or Australia to traffic racked up within the country.

I think some web site hosting cost more if lots of people download (upload from your server)your site too. That's why you see some sites with pleading messages not to directly link to their url, ie they'd prefer you copied their picture to your site and let your website incur the cost of people sucking onto their computers.

actually I'm having a hard time thinking of anything where regulation has made the cost go up, as much as deregulation or privatisation has. Even our bus tickets are more expensive. And don't get me started on the UK Rail system. Yikes.

Power has never been deregulated in CA in recent history for any appreciable amount of time. The final cost a consumer pays has always been set by the govt. It's regulation, not deregulation that causeed the CA power crisis. Regulation removed incentive to build power plants in CA, even though increased demand was obvious, because the profit wasn't enough to offset risk. The Govts. answer was to depend on buying power from other states. These states gouged CA, knowing they would have no alternative because they didn't have enough power of their own. Deregulation would cause a short term rise in prices, but ultimately lower prices as more competitors enter markets to compete aginst gouging monopolies.

This is enabling a market to work fairly (or some slightly closer approximation to fairly) by bitchslapping a 400-kilogram gorilla. This isn't imposing regulation on a working market.

When it comes to using a monopoly position to screw competitors out of the market, Telstra makes Microsoft look like an amateur. About the only difference is that rather than Microsoft buying politicians, the government owns 51% of Telstra.

And like Microsoft, the only way it's ever going to improve is if somebody takes a hacksaw to Telstra. They should seperate the retail business into a seperate entity, which pays the network provider just like all the other telcos.

Labor actually suggested this on the quiet (after they got themselves into a horrible mess over telecommunications policy) but I doubt they'll ever actually implement it.

Telstra is about 51% owned by the goverment. They sold off the other 49% to retired people who will lynch the local goverment if the prices drops much more. Of course they bought at the height of the dot com bubble so its a wonder that the shares are worth anything at all.

Telstra (and the reglators) are all tring to serve two (or more) masters and it doesn't work. Until they sell off all of Telstra but they won't do that since the rural people think once that happens, they won't be able to get service anymore.

They should sell all of it or buy back all of it. The current situation is a joke and helps no one.

Telstra making money? Of course... when your a monopoly phone company and your the most expensive phone company in any developed country, its going to be profitable. Your phone bill is simply a luxury tax.

I hear lots of excuses like Australia has lots of rural areas and it cost too much to run lines since they have to support everyone. So does Alaska except it also has to deal with ice and a population density that makes Oz look overcrowded. Take any state in Australia and you can find one in the US that has about the same population covered over the same area. For example Missouri and Vcitoria have the same area and poulation, its just the population base in Missouri is more spread out. That makes phone service more expensive to operate but the local utilites commission (something the Aussies don't have because the phone co is the goverment). The PUC says a monopoly phone company must make a 10% profit on its investment. Thats to ensure that the company will continue to provide services and can get investors to fund that development. The result is phone costs in Missouri are much lower than Australia.

One other gripe is I can call Missouri from Melbourne on a mobile phone for 1/2 the cost of calling a local landline. To me that says something is very wrong with the price structure. If you hunt for special deals, you can call the US on a land line cheaper than you can call a town 51km away.

Just to put it context, bills I've seen for the last month thanks to the local phone co...$110 for a mobile phone. $10 for the montly fees , 10 calls (less than 2 minutes) and lots of sms messages.$300 for a different mobile phone for work. Used like the one I used to have the US that cost me us$29/mo.$115 for land line phone including local calls. There was about $20 in internatioanl calls in that.$90 for cable internet + $65 or so for cable tv.Thats nearly $700. (about us$400)

Having lived in the US and Australia, I can say that Telstra gets a larger amount of my money than any other phone company ever has. To put it a different way, at work we would have had a extra $24,000 in the year end bonus pool if Telstra would have charged a fair price for their services.

I can think of a few right off hand. For example: the UK railways system (brilliant until it was contracted out - now it's unsafe and expensive), the energy market in just about any deregulated market (yay 18% jump in energy costs in Toronto), the Canadian aviation market (when the Fed let AC buy Canadian and didn't bail out C3000, all meaningful competition ended and fares skyrocketed), the payphones (payphones used to cost a quarter when Bell was a regulated monopoly - now they're open and cost up to 40 cents). I could easily go on, but I won't (because it's boring).

And then there's the theoretical reason why prices should go up when unregualted, especially in an industry that requires huge amounts of overhead and capital. Companies are naturally greedy. Their duty to their shareholders/owners is to create the most revenue at the least cost to them. therefore, they raise prices until the market won't hold it anymore, and then they lower them a bit. Sure, competition will try and keep things in check, but in industries where it'd difficult for a new company to break in without sizeable investment, where is the imperitus for the companies to meaningfully compete, and not to just cartel the prices up? Contrast this to a regulated system, who's goal is to ensure a "fair" price for the consumer.

In a privatized/unregulated system, the goal is to make more money at the lowest cost by any means, and the power lies with the corporations. In a regulated system, the goal is to make more money at the lowest cost, while maintaining a "fair" price, and the power lies with the government. While the government may not be "the people," for the most part (Bush excepted, see Chirac or Schroeder for a decent example) they're closer to the wills of "the people" than the mega-corporations are.

Actually, phones and banks are both examples of cases where government regulation worked. Maybe you don't remember the days when you had to pay a license fee for each phone extension in your house, and when long-distance calls cost an arm and a leg, but I sure do. The government came in and broke up AT&T, and, after some initial confusion (partly caused because they nearly waited too long), prices went down. Then, after competition was established in the phone market, the gummit pulled back some of the regulations, exactly as they should have done, and prices went down again. Astonishingly (at least to anti-gummit conspiracy theorists), the gummit did the right thing in both cases, and the whole thing worked pretty damn well.

As for banks, I'm too young to remember 1929, but I know the lessons of 1929, and the only reason I'm willing to keep any of my money in banks these days is that the banks are still heavily regulated!

What about the medical profession? Do you think it's a bad thing that anyone who wants can no longer hang up a shingle, claim to be a doctor, and dispense alcohol- and cocaine-laced syrups as all-purpose nostrums? Oh, sure, you could probably save money, but at what cost? What about the automobile industry? Do you think it's bad that we no longer have cars that explode at a tap? I could go on and on.

The fact is that the so-called "free market" of classical economics works by positive feedback. Anyone who's studied any basic engineering should be able to point out the flaw in such a scheme, but somehow, the lassez-faire crowd are able to ignore a few divide-by-zero cases (monopolies and cartels, where the competition is zero) in their calculations.

Do I think overregulation is bad? Yes, it's like an overengineered solution, it's too expensive. Do I think underregulation is bad? Yes, it's like an underengineered solution, fragile, and likely to break apart in a heavy wind. Do I think the proper balance is difficult to find? Yes. Do I think that means we should give up and dump all government regulations? What kind of idiot are you?

Consumer Reports had a little side-bar article a few months back tracking prices of phone service, airlines, cable TV and something else? in the years befor and after deregulation.

There were definite kinks in the graphs of each service in the year that deregulation was introduced. However, the kinks were all the "wrong way". Prices in each of these areas were falling before deregulation, and falling after deregulation, but there were falling faster before the deregulation occurred.

The conclusion was that is is not as easy to say "deregulation always works to the benifit of consumers" as one might think if one just looks at prices immediately before and some time after deregulation.

Yes and no. It's not California's fault for things like what Enron, etc. were doing. It is their fault for not having enough power plants through caving in to every special interest group that wants to protect some almost endangered field rat or type of mosquito. (I kid you not. One of the things in the way of building at a particular site was that it would disrupt the breeding ground of a particular species of mosquito.)

Actually, in an ideal internet, there shouldn't be a need for this kind of regulation. But today's internet is not ideal. Here is some (graph-theoretic) insight into why this happens, and how this is likely to change (for the better) in the future.

Today's internet is predominantly a tree. The ideal internet is a much more highly connected graph. This is because the internet is still expanding. During this expansion phase, new entrants are largely content to buy connectivity from a single upstream provider. The rate at which new edges are being made between existing nodes of the graph is much less than the rate at which new nodes, with a single edge, are getting added. Therefore, the fundamental premise of capitalism is not met: there isn't freedom for the buyer to choose any seller they want. Thus the bigger players are able to hold the smaller fish at ransom, so to speak. At this stage of the game, regulation is a must to take things forward.

Obviously, this cannot continue forever. Soon most machines will get connected, and then all new edges that are created will be between existing nodes. Thus the graph is going to become denser, and the situation becomes more conducive for a capitalistic internet to function efficiently by itself.

Two things suggest otherwise. Power laws and economies of scale. If the marginal cost of bandwidth were linear, all path weightings could end up being equal. Traffic tends to cluster on popular resources, so it's more cost efficient to build a tree structure than a complete graph. It'd be nice to have a complete graph, but most people don't browse all sites equally across the Internet. They tend to cluster around a few select sites. So, trunk lines offer cost savings, which means the market will gravitate towards a predominantly tree-like structure.

The graph will become more like a theoretical complete graph with time, but the weightings will still strongly follow a tree-like pattern. The only way this will change is if wholesale bandwidth costs drop to a point where supply far outstrips demand.

"Traffic tends to cluster on popular resources, so it's more cost efficient to build a tree structure than a complete graph... The graph will become more like a theoretical complete graph with time, but the weightings will still strongly follow a tree-like pattern."

I believe that Akamai and like companies are doing quite a bit to take us away from a tree pattern. Anyone know where a good picture of current worldwide traffic can be found? (is there such a beast anymore?)

is that the major ISPs don't charge for traffic based on where it goes to. This means that a megabyte sent to the US costs the customer just as much as a megabyte sent to another customer of the same ISP.

A few years ago, when Telstra was the only provider of high speed internet, they charged $AU65/month for 100MB of traffic but you got free traffic to other cable users (as well as email and news provided you used their servers).
Unfortunately, free traffic was scrapped in a bid to make cable internet more "accessible".

Just imagine what the state of the internet would be if all high speed ISPs nowadays offerred free or at least discounted traffic between their own customers. It would not only make customers happier, but it could even save the ISP money by reducing the load on their international link. Luckily, most ADSL providers do this, but the big [bigpond.com] two [optusnet.com.au] cable providers don't.

Anyway, to stay on topic, although universities here already do it, I think that residential ISPs should start a differential cost scheme where traffic within the country is cheaper than international traffic. It would make multimedia use via broadband a lot more feasible than it is today.

A few years ago, when Telstra was the only provider of high speed internet, they charged $AU65/month for 100MB of traffic but you got free traffic to other cable users (as well as email and news provided you used their servers). Unfortunately, free traffic was scrapped in a bid to make cable internet more "accessible".

I think you're missing the point, at least partly. The issue at hand is how ISPs charge each other, not how ISPs charge their customers.

While I am a long-time advocate for open peering policies; I don't think regulation is the answer. Every ISP should make their own decision who to peer with and who not. In the end, I believe the market will do it's job: non-peering ISP's have less-optimal routing while peering ISP's usually will have the shortest route to your destination. A question which comes in mind with forced peering is which routes you will receive. If UUnet is forced to peer with joe-local-isp in Vienna, will they be forced to announce all of their routes, including those from the US? Or just the local routes which UUnet has in Vienna (or Europe)? I hope RIPE, ARIN, LACNIC and APNIC have the staff to handle all those additional ASN requests...

[Disclaimer: I do a fair amount of work on peering for a tier-1 ISP. By tier-1 I mean we run a default free network, and do not pay anyone for transit, as opposed to any marketing definition]

Our view is similar - with around 15% of the internet routing table as our customer base, giving $small_isp peering would give them vastly more value than it would give us (we already see their routes through a peering provider that we don't pay for, and probably incur only 10-15ms of additional latency, with a guarantee from our peer(s) that they'll work with us efficiently and promptly to resolve QoS issues).

Indeed, offering peering to $small_isp would cost us money, since running that 'efficient and prompt cooperation' peering service (with proper traffic engineering & proactive monitoring) is by no means zero cost, and has a definite per-peer marginal cost.

This difference in value has to be compensated somehow, which is why we offer a 'discounted transit' pricing to people with interesting routes, or just plain transit (where you are free to ignore our non-peering routes) to very small players.

Yes, this means we get paid twice for some traffic (customer to customer), and yes, this means we get money for both sending and receiving an email to our service.

Alternatives that would allow a more equitable region-by-region peering service are one AS per city/country/region, or some form of BGP confederation or other method of IBGP filtering (both of which have huge operational and scalability gotchas at present).

It looks far more attractive to us to stay out of these markets, just as we stay out of voice markets that are stupidly regulated wrt interconnection.

We actively work with regulators in the US and Europe to explain our position re: IP peering. One of the main things the regulators in those countries have said is that your peering policy (i.e. the criteria you use to assess whether someone is a settlement free peer or needs to pay) should be available, transparently applied and preferably public.
This prevents a tier-1 peering oligarchy from restricting the entry of new networks that are of a similar scale and value, and is working fine in the US (q.v. Cogent and other 'new' entrants getting peering after building a large network).

Some of this changes (mostly wrt allowed traffic ratios) if you are primarily a hosting network, rather than a transit provider (see Above.Net's 'peer with almost anyone' policy).

http://www.nanog.org/mtg-0006/peering.html has a very interesting presentation by Bill Norton (who has thought about peering a good deal more deeply than most) on the peering decision process.

Assuming perfect competition. Beyond tabloid economics the history is that Telstra was created as a public asset with taxpayer funds, appropriate for the technical and economic size of Australia at the time. Who paid for the infrastructure that Telstra is using to control the market, us and out parents!

The Govt. has sold half and wants to sell the rest. At this stage that would lead to a private monopoly situation which is bad. As Australia slowly takes up broadband and data charges become a larger part of the cost base of the smaller independant ISP's it really has the potential to crowd them out of the market.

I had Optus cable for about 18 months, but live now outside access. I have always used smaller dial-up's as they are significantly cheaper (despite the pricing disparity) and tech support actually know what to do if I call and tell them there's a fault with a mail or news server).

The smaller guys are starting to offer ADSL for tolerable $$$, despite all Telstra's obstruction and this can only help with the take-up of broadband.

There is a lot of background that this article leaves out. Without that background, yeah it sounds unfair. With the background things make more sense.

There are two main types of connection in the Internet world: peering and transit.

Transit connections generally occur between ISPs of different sizes. The small ISP pays the large ISP for access, and can use the large ISP to send packets anywhere. Hence the "transit" name: packets can transit the large ISP on their way to anywhere. Payment varies, but is generally some combination of fixed capacity-based payment and per-packet payment.

So small ISP A sends packets to small ISP B via Big ISP. Both A and B pay Big ISP for the privilege. But they can cut their transit fees by having a mutual connection. That way packets between A and B bypass Big ISP, which is cheaper. That is a "peering" connection. Crucially, you are not (usually) allowed to send packets to a third party via a peer. Peering connections tend to be problematic because they involve co-operation between two parties who may well be competing for the same customers, and with multiple peering points there are some interesting tricks you can play with the routing to get traffic over on to the other network as fast as possible.

The market forces that created this situation are fairly straightforwards. In the old days everybody just gave free transit to everybody else. Then in the mid 90s the big ISPs noticed that they were giving a free ride to the small ISPs, because the small ISPs didn't need to maintain long-distance infrastructure (e.g. submarine cables), even though both small and big ISPs were competing for the same revenue stream. The big ISPs therefore started demanding money from smaller ISPs who wanted to connect to them, and the current system of transit and peering evolved from there. There were lots of articles then decrying this trend and talking about "the balkanisation of the Internet". It didn't happen because of Metcalfe's Law: the value of a network is proportional to the square of the number of nodes. Nobody would want to sign up for half the Internet, no matter how much cheaper it was.

Its actually pretty easy to understand if you think of it in terms of yourself as the ultimate small ISP. You have a transit connection to a larger ISP which you pay for, and through that you can send packets anywhere on the Internet. If you found yourself exchanging tons of data with your neigbour then you could run an Ethernet cable over your fence and have a peer connection. But it would be very bad manners to send traffic to anywhere else via that connection.

BTW, data direction is completely irrelevant to all this. A lot of people who first looked at Internet charging tried to apply the telephone "originator pays" model. But that doesn't apply to the Internet. If I look at a website then I am the "originator" of the request even though most of the data flows in the other direction. But from the economic point of view what matters is that there are two parties who want to exchange data. The website owner is just as eager for me to read the website as I am. And so both of us pay. The same argument applies at the ISP transit link level: if a customer of ISP A sends and email to a customer of ISP B then its equally important for A and B that the email arrives.

So in this case, the only real problem is if the large ISP (presumably Telestra, since that is the incumbant telco) is using its monopoly power to hike up transit charges and give poor service to would-be transit customers, and therefore squeeze out the small ISPs. This is a straightforward telco regulation issue of the sort that comes up all the time, and is not news.

If the transit connection market is regulated so that the large ISPs make a loss on transit connections then this will lead to more centralisation because ISPs will find it more cost effective to leech off transit connections than maintain their own long-haul links. Ultimately the only long-haul links will be provided by the regulated monopoly, and then only because the regulator makes them. If ISPs are free to set their own transit fees then (monopoly abuses apart) they can expect to install long-haul links and make a return on their investment.

Part of the allegation against Telestra is that it is using its monopoly power to inflate transit charges. If so then I agree that this is wrong and the regulator needs to do something about it. However in the general case small ISPs still pay big ISPs for transit, even in a perfectly competitive market. This is because the big ISPs have both local and long-haul infrastructure, and the small ISPs don't. Its simple market forces, and they are giving the right answer.

We have to move to a system where slashdot gets revenue from the amount of data that is uploaded, otherwise you'll click on slashdot one day and find it is no longer running.

Obviously money has to flow to Slashdot through some mechanism because they are a commercial operation.
At present Slashdot is funded by advertising, which consumers ultimately pay through the higher prices charged by the advertisers. Slashdot wants page impressions because thats what they get paid for, so they are eager for me to visit the site. If they switched to some kind of subscription of microtransaction payment system then they would still want traffic. If they were paid per byte downloaded through a surcharge on my ISP bill then this would just be a different way of organising the same thing. But the bandwidth would still need to be paid for, and this will involve the telcos getting some of the money. There are lots of ways of routing the money through the system, but they all give the same answer at the end. Don't let the route the money takes confuse the issue.

If a popular website is located in Australia then Telstra presently bills the website owners for the traffic that comes from it. If the website owners relocate to a colocation in the USA for instance, then Telstra has to pay to pull the traffic into Australia. The reason is that US carriers are bigger fish than Australian carriers and they won't give Telstra access to the POP unless Telstra pays them.

But there are several Tier 1 Carriers (to give them their formal name) and no evidence I am aware of that they are running a cartel. Its just that being a Tier 1 Carrier (i.e. with international presence) involves maintaining lots of very expensive infrastructure that Tier 2 and 3 carriers (like Telestra) don't need. So if you want access to that infrastructure you have to pay. Why is this unfair?

Of course having an Australian website relocate to the US works out more expensive when its accessed in Australia: the data has further to go. Of course if the website is mostly accessed by people in the USA then relocation, or at least mirroring, might work out cheaper. Again, why is this unfair?

No, market regulation is neither bad nor good...it is simply a necessity, much as police are a necessity when large numbers of individuals are involved. Like civilized society, markets need rules too. When properly formulated and enforced, regulations ensure that everyone has a level playing field.

Regulations can be good or bad, or neither, or both simultaneously. It all depends on how well the regulations achieve their goals...and whether you agree with them.

Why is market regulation a necessity? Your analogy with policing is a false one. The best reason for policing is to stop people from interfering with my life, e.g., through theft and murder, whereas market regulation interferes with my life. Not only are these things different, they're opposed. One increases my freedom to live my life unhindered and the other actually decreases it.

Because hundreds of years of experience with markets has shown it is. Read your history and economics textbooks.

Your analogy with policing is a false one.

No, it isn't, and you don't provide any justification whatsoever for saying it is false. You could at least try to convince me.

The best reason for policing is to stop people from interfering with my life, e.g., through theft and murder, whereas market regulation interferes with my life.

Market regulation also has its benefits, just as police can also restrict your freedoms. Large businesses depend on government setting marketplace regulations to ensure that all companies know the standards of behavior. Again, regulations aren't inherently bad.

Not only are these things different, they're opposed. One increases my freedom to live my life unhindered and the other actually decreases it.

Give me some examples. I can certainly come up with some good examples of how market regulation can benefit you and the marketplace. Again, just because some regulations aren't in your interest you have to avoid "throwing the baby out with the bathwater" and declaring them all to be bad.

Obviously citing a couple of examples cannot prove that regulation is bad in general...

Let me say one reason for rules is that there are people and organizations that will do unacceptable things (and often feel obligated to do them in the interests of their stakeholders) in the absence of rules to the contrary. Can we then agree that rules *might be a necessary evil*?

You site as examples rules that affect wages and labeling requirements for commerce. These are arguably bad (or misguided or selfish) regulations but certainly don't serve as arguments dismissing the value of laws such as those against price fixing in the absence of a competitive marketplace, or ones that keep large chemical companies from freely dumping carcinogens into waterways, or ones that set minimum standards for the packaging and shipment of explosive and caustic substances.

I know that currently it is popular to imagine that modern society got where it is without laws regulating business, or that people won't do the kind of harm with corporations that individuals can do with knives and guns. But history tells us that businesses DO need regulation, and that their power and resources allow them to cause pain and suffering to a great many more people than a single individual with a baseball bat.

Moreover, many business laws are much less dramatic than that, most serving to make business transactions more orderly and efficient. Businesses often ASK government to pass regulations to clarify what is acceptable corporate behavior and to ensure that the rules are applied equally and fairly to all competitors. This is what I meant earlier when I spoke of "providing a level playing field." Such rules are often mutually beneficial--not harmful--to business interests. Read up on the subject of Game Theory on how cooperation with enforceable rules can maximize the benefits to all the partners in a relationship.

Market regulation and trade restrictions are only "commie" if you're an American, whereby you pretend you don't have any (even though you do, heavily), force everyone else to abolish them, and thus stuff your own coffers even further.

No, he's right, and the circular reasoning you espouse, based on a spurious premise (external rules, and agencies such as police, governments, etc.are "necessary") is precisely what is holding back the advance of civilization.

I'll ignore for the moment that this sounds like flamebait, but are you really espousing anarchism as a political model for advancing civilization? Please explain how civilization would work WITHOUT rules. Even the most primitive civilizations have rules, typically lots of rules.

1. So now you're arguing FOR rules when before you argued AGAINST them? I'm getting dizzy....

2. Rules get ignored if there is no organization (formal or informal, police or posse) that adequately enforces them. I just had this discussion with a friend who moved from his old neighborhood to a new community with strict homeowner's rules and enforcement to escape the drug dealers and trogolodytes who kept him awake at 1 a.m. tuning up their off road vehicles.

3. Please provide an example of a modern country within an order of magnitude of the size of Australia that has been able to exist for more than a generation without a centralized political authority.

In any case, none of this is even slightly relevant when it comes to maintaining order among telecommunications providers. Capitalism is a game played to win, and every game needs rules to ensure all are satisfied that it is won fairly.